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Aug 07 - 11:55 PM

AUD/USD - CORRECTED-BUZZ-COMMENT:AUD/USD Vulnerable To Shift In Central Bank Expectations

By John Noonan  —  Aug 07 - 09:50 PM

Corrects run of consecutive RBA hikes to three (not four) in paragraph 3

Friday's much stronger than expected U.S. non-farm payrolls nL1N2ZG2G3 has resulted in a significantly hawkish shift in Federal Reserve expectations that will likely support the greenback against the Australian dollar, in the short-term at least.

The market is now pricing a 70% chance the Fed will hike 75 basis points at their September meeting, up from below 30% just a week ago nL1N2ZH1Y3.
Hawkish comments from Fed Governor Michelle Bowman over the weekend further increase the chances of another jumbo hike nL1N2ZH1XZ.

The Reserve Bank of Australia is also signalling more tightening in the coming months, but hinted in their statement following the 50 basis point hike on Aug.
2 that they may opt for 25 bps next, to assess the impact of three straight 50 bps increases nL1N2ZE08W.

The AUD/USD fell around 0.80% on Friday, but losses were cushioned by a muted reaction to the hawkish turn in Fed expectations in equity and commodity markets.
Risk asset resilience may be in for a stern test if U.S. CPI on Wednesday comes in above forecasts nL1N2ZH20G.

Support for the AUD/USD is at the 50% retracement of the 0.6682/0.7048 move at 0.6865 and the 61.8 Fibonacci retracement of that move at 0.6822.
A break below 0.6820 would expose a retest of the July 14 low at 0.6682.
A close back above the 10-day moving average at 0.6960 would ease the downward pressure.

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Refinitiv IFR Research/Market Commentary


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